The Catch-22 Leadership Vise of Revenue/Cost Pressure vs. Performance Obligations

Leaders who would like to embrace and improve institutional performance often report being trapped in a “catch-22” situation.  They are being asked by policy makers to improve the academic aspects of institutional performance, a task they believe will require additional expenditures and, therefore, additional revenues.  Yet, the same policy makers are asking higher education leaders to hold the line on tuition increases, and are also reducing public funding for higher education relative to other tax-supported needs.  Catch 22!! 

The catch-22 reaction is only heightened by a broader revenue/cost pressure that is being increased simultaneously with the pressure to improve institutional academic performance—the full squeeze of the opposing pressures of the catch-22 leadership vise.  Over 200 citations are offered in Table 2 (in the Appendix) as evidence that the evolving social compact with the public calls for higher education to practice the kind of innovation described in the NII report to have productivity as one of its primary goals or byproducts.  Each citation in Table 2 is cross-referenced to the six performance obligations in Table 1, as well as to a nationally observable aggregate revenue/cost pressure described below as multiple pressures points, a differentiating subset of which applies to any institution.

Revenue pressures arising from an increasing flux in traditional revenue sources, such as the

• declining percentages of state allocations to higher education relative to state allocations to other needs, such as health care, public schools, and incarceration;
• declining percentages of institutional revenues coming to institutions, directly or through their students, from state and federal subsidies and grant programs;
• increasing tuition inelasticity resulting from competition from peer and for-profit institutions; and
• increasing and, for many institutions, risky reliance on gifts, grants, and contracts (relative to public funding).

Cost pressures, such as

• funding more and larger need-based grants from internal non-public resources; and
• escalating (competitive) tuition discounting for less needy, but highly qualified students.

The reason for introducing revenue/cost pressure is to assuage both the potential reaction that this author is unfamiliar with the apparent catch-22 nature of emerging policy expectations and, more importantly, the perception that public policy is being amended on an uninformed catch-22 basis to destroy an ideal, generation-spanning social compact between the public and higher education.  The social compact of the last half century, after all, placed little to no emphasis on expense accountability.  In contrast, today’s policy makers are aware of the role of technology-enabled innovation in reducing unit costs while increasing competitiveness throughout the services economy, and they are bringing that awareness as an expectation to the evolving social compact with higher education.  It is technology—more accurately, technology-enabled competitive innovation as practiced throughout the economy—that takes the catch-22 out of the discussion of the evolving social compact and fairly places expense accountability and the affordability of access in Table 1 among four other institutional performance obligations that are not directly financial in nature—each of which would nevertheless benefit from the wise use of technology.